Category: Slovakia

We guide you through the current overview of energy subsidy applications.

– Subsidies to businesses for the first quarter of 2023
– Energy price limits for small electricity and gas consumers
– Energy price limits for households
– A new support scheme approved by the European Commission with year-round subsidies for companies

An overview of what’s coming, what’s not and what’s not yet known:

What’s coming up:

– Subsidies to businesses for the first quarter of 2023;
– Energy price limits for small electricity and gas consumers;
– Energy price limits for households;
– A new support scheme approved by the European Commission with year-round subsidies for companies

What’s not coming:

– Subsidies for the fourth quarter of 2022;
What is not yet known:
– Provision of subsidies to economic operators after the first quarter of 2023 until the end of the year

Detailed information on subsidies:

What’s coming up:

1. Subsidies for the first quarter of 2023

The Ministry of Economy of the Slovak Republic has published a call for applications for a subsidy of 80% of eligible costs, i.e. the difference between the actual price of gas and/or electricity paid and the set maximum limits of EUR 99/MWh (gas) and EUR 199/MWh (electricity). This is the net price of the commodity excluding distribution and network charges. The call is available on the web page of the Ministry of Economy of the Slovak Republic (section „energo dotacie“) and the application deadline is 30 June 2023.

The application must be submitted from the applicant’s electronic mailbox to the Ministry of Economy of the Slovak Republic, one month retrospectively.

– The maximum amount of the subsidy is EUR 600 000 in total per economic operator for the first quarter of 2023, i.e. a maximum of EUR 200 000 per month.
– If the amount requested exceeds EUR 100 000, the applicant must be entered in the register of public sector partners and the application must identify the beneficial owners.
– Eligible applicants are economic operators, i.e. providers of goods and/or services, irrespective of their legal form, method of financing and size, with the exception of credit and financial institutions. Enterprises in difficulty are also eligible.
– An eligible applicant is not a business that does not have an established off-take point during the eligible period and does not have a unique billing EIC and/or POD code that appears directly on the invoice.
– An eligible applicant is only an end-user of energy and is not an entity that has consumed energy for the purposes of electricity and heat production during the eligible period.
– The subsidy is backdated, i.e. in February 2023 businesses can apply for the January 2023 subsidy, in March they can apply for the February and/or January 2023 subsidy, and so on.
– The eligible period is preliminary the first quarter of 2023, i.e. the period from 1.1.2023 to 31.3.2023.
– The Ministry of Economy has earmarked a total of EUR 279 820 623 for these purposes.

2. Support for small consumers of regulated electricity and gas

Small enterprises with an annual consumption of up to 30,000 kW of electricity or 100,000 kW of gas have a guaranteed price for part of the regulated energy supply, with fixed ceilings of EUR 99/MWh (gas) and EUR 199/MWh (electricity) for the whole year 2023, according to Government Regulation No 19/2023 Coll. As this is a commodity price, this price will be increased by the fees according to the decision of the Regulatory Office for Network Industries (ÚRSO).
For businesses that have already received bills for 2023 with higher energy prices than those now guaranteed, the Economy Minister recommends that they ignore these bills and do not pay them. Energy suppliers should issue new invoices.
Entities supplying energy to small consumers will be compensated.

3. Guaranteed energy prices for households

On 16 November 2022, the Government of the Slovak Republic, by resolution, approved the so-called general economic interest, which set the maximum price of electricity for households. The Government has thus set the price of electricity for households at EUR 61.2 per MWh, which is, however, increased by the coefficient determined by the Decree of the Regulatory Office for Network Industries (ÚRSO). The resulting amount of electricity for households thus amounts to EUR 67.3/MWh. The level of the electricity price for households thus remains at the 2022 level.

At the same time, the price of gas for households was also adjusted.According to the Slovak Government Regulation No.19/2023 Coll., the price of gas is made up of a monthly payment per customer place of EUR 1.50 and the maximum gas tariff, which is determined separately for each type of tariff (D1 – D6, or D7 – D8). As a result, gas prices for households are thus increased by 15% at the 2022 price level.

4. New subsidy system

Slovakia has sent a new aid scheme to the European Commission for notification, following point 2.4 of the Temporary Crisis Framework. The scheme is intended to provide aid in a number of ways and on the basis of various conditions, which will be specified in more detail in the published call for proposals. Factors that will be considered include, in some cases, for example, the decline in EBITDA compared to 2021 or energy consumption in recent years.
The European Commission has already approved the specific draft scheme drawn up by the Ministry of Economy and notified the Ministry at the end of January 2023. Thus, the publication of the call for proposals by the Ministry of Economy is currently pending. This type of aid is provisionally to apply until the end of 2023 and is intended to help in particular energy-intensive businesses.

What is not coming:

1. Subsidies for the fourth quarter 2022

According to the information from the Ministry of Economy of the Slovak Republic, it is no longer planned to provide subsidies for energy consumed in the fourth quarter of 2022. Thus, compensation was provided only for August and September 2022, when energy prices were the highest. The period from October to December 2022 will thus not be covered by this type of state aid.

What is not yet known:

It is currently unclear whether subsidies of 80% of amounts above €199/MWh (electricity) or €99/MWh (gas) will continue to be provided beyond the first quarter of 2023 for the remaining months of 2023.

By Bernhard Hager, Managing Partner, Annamaria Tothova, Partner and Jan Scerba, Associate, Eversheds Sutherland

Dentons has advised DRFG on its acquisition of the Ister II project company from the Galata Group. Nosko & Partners reportedly advised the seller.

The target company owns land in Bratislava where the Ister Tower project will be situated. “The EUR 250 million project consists of three buildings: a 100-meter high skyscraper with 33 above-ground floors, as well as two smaller apartment buildings,” Dentons informed. “The project will include approximately 500 apartments, as well as commercial premises and underground parking. The construction is expected to start in the first half of 2024 and take three years to complete.”

DRFG is a Czech investment group that invests in real estate, telecommunications, financial services, and retail.

The Dentons team was led by Counsel Martin Mendel and included Senior Associate Peter Panek and Junior associates Alen Gondek and Norbert Vizvari.

Political uncertainty in Slovakia, with early elections likely to take place in September, has led to an overall slowdown of legislative work at the unfavorable time of a raging energy crisis, according to CMS Partner Sona Hankova.

“The topic that has been dominating the news cycles lately is the recent vote of no-confidence in the Slovak government,” Hankova begins. “We currently have a limited regime in which the current government is performing its duties.” She reports that a EUR 10 million referendum had been held on whether the constitution should be changed to allow for the early termination of the electoral term of the National Council of the Slovak Republic, but it “failed to achieve anything because less than 30% of the electorate came out to vote (51% was required).”

Hankova goes on to report that the parliament recently agreed that “early elections will be held on September 30. At the same time, what was settled were the amendments to the constitution which paved the way for early elections” she explains. Given such a state of political turmoil, it is not surprising that legislative efforts have largely slowed down.

“Everybody is waiting to see what the outcome of the current situation will be,” Hankova says. “Most importantly, the market is eager to see if any new measures for combating the energy crisis are passed. Right now, as things stand, citizens and households and smaller regulated businesses are protected by the government placing limitations on gas and electricity prices – but larger entrepreneurs are yet to be taken care of,” she continues. “Smaller businesses have their prices capped at EUR 99/megawatt-hour for gas and EUR 199/megawatt-hour for electricity, while the state will compensate the part of the energy costs that exceeds the above price caps at a rate of 80%.

Other business entities outside the regulated segment of the electricity and gas markets are bearing the full brunt of the current unfavorable market situation – their payments for energy supplies have increased several times,” Hankova says. “Industry is struggling and without any specific measures in place, the overall feel is that the government was not supportive enough.” Without the proper tackling of this crisis, there might be “bankruptcies and defaults across industries soon.”

Furthermore, Hankova reports that the Slovak FDI screening regime was recently updated. “Foreign businesses and investments are subject to monitoring or review which can be mandatory or voluntary, depending on the target industry. Further delegated acts are expected to specify this regime and shed more light on its scope,” she says.

Finally, Hankova reports that rising inflation is impacting businesses everywhere. “A strong uptick of inflation numbers led to, for example, some real estate sector sellers adopting a mostly sit-and-wait approach. With financing being increasingly difficult to access, and mortgages becoming more expensive – the situation is becoming all the more challenging.”

Still, not all is gloomy, and Hankova does report that, for the legal sector at least, there has been plenty of work. “Conversely to tradition, this January has been very vibrant, thanks to a number of M&A transactions that took place in late 2022, which led companies to undergo post-integration and post-merger steps,” she notes.

Political uncertainty in Slovakia, with early elections likely to take place in September, has led to an overall slowdown of legislative work at the unfavorable time of a raging energy crisis, according to CMS Partner Sona Hankova.

“The topic that has been dominating the news cycles lately is the recent vote of no-confidence in the Slovak government,” Hankova begins. “We currently have a limited regime in which the current government is performing its duties.” She reports that a EUR 10 million referendum had been held on whether the constitution should be changed to allow for the early termination of the electoral term of the National Council of the Slovak Republic, but it “failed to achieve anything because less than 30% of the electorate came out to vote (51% was required).”

Hankova goes on to report that the parliament recently agreed that “early elections will be held on September 30. At the same time, what was settled were the amendments to the constitution which paved the way for early elections” she explains. Given such a state of political turmoil, it is not surprising that legislative efforts have largely slowed down.

“Everybody is waiting to see what the outcome of the current situation will be,” Hankova says. “Most importantly, the market is eager to see if any new measures for combating the energy crisis are passed. Right now, as things stand, citizens and households and smaller regulated businesses are protected by the government placing limitations on gas and electricity prices – but larger entrepreneurs are yet to be taken care of,” she continues. “Smaller businesses have their prices capped at EUR 99/megawatt-hour for gas and EUR 199/megawatt-hour for electricity, while the state will compensate the part of the energy costs that exceeds the above price caps at a rate of 80%.

Other business entities outside the regulated segment of the electricity and gas markets are bearing the full brunt of the current unfavorable market situation – their payments for energy supplies have increased several times,” Hankova says. “Industry is struggling and without any specific measures in place, the overall feel is that the government was not supportive enough.” Without the proper tackling of this crisis, there might be “bankruptcies and defaults across industries soon.”

Furthermore, Hankova reports that the Slovak FDI screening regime was recently updated. “Foreign businesses and investments are subject to monitoring or review which can be mandatory or voluntary, depending on the target industry. Further delegated acts are expected to specify this regime and shed more light on its scope,” she says.

Finally, Hankova reports that rising inflation is impacting businesses everywhere. “A strong uptick of inflation numbers led to, for example, some real estate sector sellers adopting a mostly sit-and-wait approach. With financing being increasingly difficult to access, and mortgages becoming more expensive – the situation is becoming all the more challenging.”

Still, not all is gloomy, and Hankova does report that, for the legal sector at least, there has been plenty of work. “Conversely to tradition, this January has been very vibrant, thanks to a number of M&A transactions that took place in late 2022, which led companies to undergo post-integration and post-merger steps,” she notes.

Former Aldertree Legal Managing Partner Juraj Fuska has joined CMS’s Bratislava office as a Partner.

According to CMS, Fuska has over 20 years of experience advising on negotiations, mergers and acquisitions, corporate matters, and greenfield investments. “As part of his move, Juraj brings with him a team of three Associates, Martin Melicher, Demian Boska, and Richard Svocak,” the firm announced.

Before joining CMS, Fuska was a Partner with White & Case Slovakia, where he spent over ten years. After that firm’s withdrawal from Slovakia (as reported by CEE Legal Matters on March 8, 2022) Fuska managed the rebranded operation – Aldtree Legal – for the past year. 

“We are delighted to welcome Juraj and his team to CMS,” CMS Prague and Bratislava Managing Partner Helen Rodwell commented. “Juraj has a strong practice and client base that perfectly complement our existing offering in Bratislava, building on our strong capabilities in deal execution in complex multijurisdictional CEE transactions. We are looking forward to work with our new colleagues.”

“I am excited to be joining CMS,” Fuska added. “This truly international law firm has long been committed to the region. Its strong platform in CEE and across the rest of Europe made it an obvious choice for me to take my practice to the next level. I look forward to joining an ambitious team and growing the firm’s presence in Slovakia and Europe.”

Did You Know that, according to the Activity Rankings function of the CEELMDirect website, Kinstellar Partner Viliam Mysicka has worked on more reported deals in Slovakia over the past nine years than any other lawyer?

Mysicka has worked on 13 reported deals since 2013, putting him in first place on the leaderboard, while Dentons Managing Partner Peter Kubina is in second place with ten. Taylor Wessing’s Juraj Frindrich and Clifford Chance Partner Milos Felgr are tied for third place with nine, while Kinstellar Partner Adam Hodon, Schoenherr’s Vladimir Cizek, and MCL’s Vojtech Palinkas are tied for fifth place with eight. Kinstellar’s Jan Juroska, Allen & Overy’s Martin Magal, and Schoenherr’s Sona Hekelova have all worked on seven deals in that time, putting them in a three-way tie for eighth place and rounding out the top ten.

Want to see which deals these lawyers have worked on, or which other lawyers have been active in Slovakia over the past decade? Visit CEELMDirect.com, the world’s only truly dynamic legal directory, and find out!

Since 1 March 2021, Slovakia had a limited FDI regime applicable only to critical infrastructure. However, right after it was adopted, the government started preparing comprehensive legislation that would apply not only to selected industries but to all foreign investments in general (in line with FDI regimes in other EU Member States). After many drafts and lengthy negotiations, this new regime was finally adopted in late November 2022.

Exactly two years since the applicability of the old FDI regime, the new regime will be in place as of 1 March 2023 and will also apply to deals signed before 1 March 2023 but not closed before this date.

Transactions subject to FDI screening
The notification obligation is triggered if a foreign investor, i.e. mainly a non-EU individual or entity, intends to carry out a direct or indirect investment in a Slovak target. An EU seated entity also qualifies as a foreign investor if it is controlled, financed or acts in concert with a non-EU individual or entity, a public authority of a third country or an entity with an equity participation of a third country.

Such an investment can be:

• the acquisition of a target’s business (asset deal);
• the acquisition of a participation in a target (share deal), meaning at least 25 % shareholding/voting rights for a non-critical investment or 10 % for a critical investment;
• the increase of a participation in a target, the relevant thresholds being 50 % for a non-critical investment, and 20 %, 33 % or 50 % for a critical investment; or
• the acquisition of control over a target by other means (e.g. by controlling the composition of corporate bodies).

Interestingly, the law suggests that creation of a pledge can also qualify as a foreign investment if the pledge gives the pledgee (qualifying as a foreign investor) rights in relation to the business decisions of a target. Thus, in case of financing transactions (especially syndicate lending) it would be necessary to address the potential FDI implications.

Screening regimes
Under the new law there will be three screening regimes:

• Compulsory screening – in the case of critical investments. A standstill obligation applies and FDI approval must be obtained before closing.
• Voluntary screening – for non-critical investments. At first there is only a consultation procedure. The notification must be submitted before closing but closing can take place even if the FDI proceedings have not finished yet.
• Ex officio screening – for all foreign investments where there is a reasonable presumption that it may threaten or disrupt security or public order in the Slovak Republic or security or public order in the European Union. Only within two years after closing (without time limit in case of critical investments).

Industries subject to compulsory screening
Based on the current list of so-called critical investments, compulsory screening will be required in case of an investment in a Slovak target:

• that owns, operates, manages or otherwise uses critical infrastructure (covering a wide range of areas from energy, transportation, healthcare, chemicals to IT);
• whose activities involve dual use items, military equipment, firearms or biotechnology;
• providing digital services – online marketplace, online search or cloud services;
• designated as the subject of an economic mobilisation;
• engaged in the manufacture, research or development of cryptographic devices or components;
• active in the media sector (with some exceptions);
• that is a content sharing platform;
• that publishes periodicals or operates a news web portal; or
• that acts as a news agency.

The above list is currently only indicative. The final list will be provided by secondary legislation to be adopted before 1 March 2023.

Investigative powers and potential sanctions
The FDI provides the authority broad investigative powers in relation to foreign investments. For instance, the authority will have the right to conduct dawn raids similar to those in competition law.

As for sanctions, monetary fines for non-compliance can be imposed up to the value of the transaction or up to 2 % of worldwide turnover (on group level), whichever is higher.

Outlook
The new Slovak FDI regime will finally provide a comprehensive regime of FDI screening, albeit with a very short timeframe between adoption and effectiveness. This means that it will also catch transactions which were already signed and not closed yet.

In addition, the new law has raised various legal questions, mainly regarding the scope of transactions subject to compulsory screening, effects on financing transactions or the requirement to conduct an FDI screening in case of a shareholding increase. It will be interesting to see how this will be applied in practice.

By Michal Lucivjansky, Counsel, Maria Gabriella Manzone, Associate, Schoenherr

Freshfields Bruckhaus Deringer has launched its new shared business services center in Slovakia.

According to Freshfields, “the new center, opening in Bratislava’s iconic Jurkovic Heating Plant, will provide a consistent global service across Freshfields – enabling the firm to deliver an efficient and streamlined business services offering that can retain, attract, and develop the best talent for the future.”

“From December, the center will progressively employ more than 50 finance, human resources, and other support roles, working in close partnership with the firm’s established shared services center in Manchester,” the firm informed. “Both cities form part of the firm’s integrated global service infrastructure, providing a broad skillset of support across financial, language, and marketing services that continues to grow.”

“We’re committed to investing in the best business services talent and infrastructure to serve our clients to the highest level, and the launch of our Bratislava shared services center is the next step on that journey,” Freshfields Managing Partner Alan Mason commented. “Like Manchester, the access to a pool of talented people in Bratislava is significant, with local talent and language skills a decisive factor in our choice of location.”

The Slovak Republic has now adopted legislation that focuses on the technological development for autonomous driving and intelligent mobility. On 8 November 2022, the President of the Slovak Republic signed the Act amending certain laws in relation to the development of automated vehicles.

The approved law, effective from 2 January 2023, represents a subtle but significant step towards the development of operation of autonomous vehicles in Slovakia. The law enshrines definitions such as “automated delivery vehicle”. Additionally, it regulates the conditions for automated delivery vehicle permit holders which must be satisfied during its operation. In order to exclude liability against the artificial intelligence or the autonomous vehicles themselves, the existing definition of “driver” is extended to include a person supervising a vehicle that uses an automated driving system. Under certain conditions, automated delivery vehicles will also be able to drive on pavements and other places where pedestrians can walk, as well as on cycle paths.

In the near future, we will have to get used to possibility that we may encounter autonomously driving vehicles as road users in Slovakia. However, fully autonomous vehicles driving safely and without driver´s intervention or supervision are still a thing of the future.

By Martin Baraniak, Attorney, Noerr

December 2022 – On 1 December 2022, the Ministry of Economy of the Slovak Republic (“the Ministry”) published a call for the submission of applications for the provision of a subsidy to cover additional costs due to the increase in gas and electricity prices (“the Call”). The aim of the Call is to compensate qualifying companies and natural persons (entrepreneurs) for excessive energy prices in August and September 2022. In this article, we present an overview of the related key information.

Basis

The Call was published in accordance with the state aid scheme approved by the European Commission under No. SA. 104846 under the State aid Temporary Crisis Framework (“the Scheme”).

The Ministry has allocated a total amount of EUR 359,820,623 for applicants under the Call. The total approved amount of the Scheme is EUR 600,000,000.

Form of aid

Aid will be in the form of a direct grant and only in respect of the gas or electricity off-taken during the period from 1 August 2022 to 30 September 2022 (“the Relevant Period”).

Aid will be provided in the amount of up to 80 per cent of the portion of costs exceeding:

• EUR 99 per MWh of gas; and
• EUR 199 per MWh of electricity
  (“the Eligible Costs”).

Aid will not be provided in respect of the amount of gas or electricity consumed for the production of electricity or heat.

Minimum aid must exceed EUR 50 per application.

Calculation of the aid amount

In respect of electricity:

• aid = consumption in MWh * (average price paid for MWh in EUR – 199) * 0.8

In respect of gas:

• aid = consumption in MWh * (average price paid for MWh in EUR – 99) * 0.8

The average price for calculation purposes will be determined as the average price paid by the applicant during the Relevant Period.

Eligible enterprises

The aid is aimed at all qualifying enterprises regardless of their size, i.e., for micro, small and medium enterprises as well as large enterprises.

All types of businesses are eligible to apply for aid except:

• credit and financial institutions;
• enterprises that are (i) subject to EU sanctions, (ii) owned or controlled by sanctioned persons, or (iii) conducting business in sectors targeted by EU sanctions.

Enterprises in difficulties are also eligible for the aid.

Financial limits

The total amount of aid is limited to:

• EUR 250,000 per enterprise operating in primary agricultural production;
• EUR 300,000 per enterprise operating in the fisheries and aquaculture sector; and
• EUR 500,000 per enterprise operating in other sectors.

Application

Applications may be submitted only to the electronic mailbox of the Ministry via the form published on web portal of the Ministry – https://energodotacie.mhsr.sk/. If the applicant claims payment of aid in an amount exceeding EUR 100,000, the application must also contain identification of the ultimate beneficial owners.

The application must be submitted separately for each operational unit (in Slovak: prevádzka).

The deadline for submission of applications is 22 December 2022.

The Ministry will inform the applicant on the approval or refusal of aid within 30 days from submission of the application. If the application is not approved due to formal reasons, the applicant may re-submit the application.

Critical points

Register of Public Sector Partners

• Under Slovak legislation, if a person receives funds from the state budget in an amount exceeding EUR 100,000 as a one payment, it must be registered with the Register of Public Sector Partners (“the RPSP”).
• Registration with the RPSP may take several weeks, and thus we cannot rule out that many applicants will not manage to get registration before the deadline for submission of applications under the Call.
• It appears that the application form calculates the sum of aid automatically and applicants are not able to apply for a lower sum, e.g., below the EUR 100,000 limit for RPSP registration, and therefore applicants that are not able to register with the RPSP before the deadline would not be able to benefit from compensation at all.

Off-take points requirements

• Only applicants whose off-take points are assigned with an official code, i.e., (i) a 16-digit EIC code in respect of electricity, or (ii) a 20-digit POD code in respect of gas (“the Official Codes”) are eligible to apply for the compensation.
• The Official Codes are assigned to off-take points directly connected to the distribution / transmission system or gas distribution network. However, in many cases, meters within retail / office buildings used by tenants to record their consumption do not have Official Codes assigned.
• Therefore, it is questionable how the new rules will apply to entrepreneurs operating in leased premises.

By Roman Oleksik, Partner, and Erik Neupaver, Associate, Kinstellar